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As in, who gets the best deal, why didn’t that deal go down, how do I get a deal, what should the deal terms be?

This is of course in the air given the whole Google+ fracas, but it’s part of a larger framework I’m thinking through and hope to write about. On the issue of “deals,” however, a little sketching out loud seems worthwhile.

It’s a common lament: A small developer who feels boxed out by whoever got the sweet deal. In this case, it’s on Facebook, but we all know it happens inside the Apple store as well (whoever gets top billing, gets sales). Closed ecosystems controlled by one company create this dynamic. There’s only so much real estate, and the owner of the land gets to determine the most profitable use of it.

Google now appears to be acting the same way, cutting Google+ a “deal” so to speak, giving it the best real estate for all manner of search queries. That’s not how search was supposed to work. Search was supposed to reflect the ongoing conversation happening across all aspects of the Internet. If you were that small developer, you worked hard to get your service noticed on the web, and as it picked up a following, search would notice, start raising your profile in search results, and a virtuous loop began. Is that concept now dead?

Search isn’t supposed to be about cutting a deal to get your company’s wares to the top of relevant searches. In my reporting over the past week, most of my source conversations have been about failed deals – between Google and Facebook, or Google and Twitter. But search is supposed to be about showing the best results to consumers based on objective (or at least defensible and understandable) parameters, parameters *unrelated to the search engine itself.*

With Google Search Plus Your World (shortened by many to SPYW, which is just laughably bad as an acronym), it’s rather hard to tell the two apart anymore. When I wrote last year that Google = Google+, I meant it from a brand perspective. I didn’t realize how literal it’s become. Because with SPYW, all I’m getting is Google+ at the top of my results. I know I can turn SPYW off, and I probably will. Or, I can bail on Google+ altogether. But there is a real conundrum in doing so – more on that in my next post.

Some are arguing that search is no longer about results anymore, and that for years search has pretty much been about paid inclusion anyway (either paid through SEO, or paid through ads, which increasingly don’t look like ads). That now, Google is focusing entirely on getting you an answer, and surfacing that answer right there on the results page. Perhaps the “right answer” is best found through cutting deals.

But I hope not. Because for me, search is a journey, not an answer.

This SPYW story has raised so many questions, it’s rather hard to sort through them all. I guess I’ll just keep writing till I feel like the writing’s done…

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Just saw this hilarious Hitler video. If you know the genre and have been reading about Google+, then you know everything you need to know to enjoy this.

(By the way, someone told me about this, so I searched for it on Google. And all I got was Google+ results, not the actual video, even though I searched for it by name. Therein lies the problem, Google).

(image) I’ve just been sent an official response from Google to the updated version of my story posted yesterday (Compete To Death, or Cooperate to Compete?). In that story, I reported about 2009 negotiations over incorporation of Facebook data into Google search. I quoted a source familiar with the negotiations on the Facebook side, who told me “Senior executives at Google insisted that for technical reasons all information would need to be public and available to all,” and “The only reason Facebook has a Bing integration and not a Google integration is that Bing agreed to terms for protecting user privacy that Google would not.”

I’ve now had conversations with a source familiar with Google’s side of the story, and to say the company disagrees with how Facebook characterized the negotiations is to put it mildly. I’ve also spoken to my Facebook source, who has clarified some nuance as well. To get started, here’s the official, on the record statement, from Rachel Whetstone, SVP Global Communications and Public Affairs:

“We want to set the record straight. In 2009, we were negotiating with Facebook over access to its data, as has been reported. To claim that the we couldn’t reach an agreement because Google wanted to make private data publicly available is simply untrue.”

My source familiar with Google’s side of the story goes further, and gave me more detail on why the deal went south, at least from Google’s point of view. According to this source, as part of the deal terms Facebook insisted that Google agree to not use publicly available Facebook information to build out a “social service.” The two sides had already agreed that Google would not use Facebook’s firehose (or private) data to build such a service, my source says.

So what does “publicly available” mean? Well, that’d be Facebook pages that any search engine can crawl – information on Facebook that people *want* search engines to know about. This is compared to the firehose data that was the core asset being discussed between the parties. This firehose data is what Google would need in order to surface personal Facebook pages relevant to you in the context of a search query. (So, for example, if you were my friend on Facebook, and you searched for “Battelle soccer” on Google, then with the proposed deal, you’d see pictures of my kids’ soccer games that I had posted to Facebook).

Apparently, Google believed that Facebook’s demand around public information could be interpreted as applying to how Google’s own search service was delivered, not to mention how it (or other products) might evolve. Interpretation is always where the devil is in these deals. Who’s to say, after all, that Google’s “social search” is not a “social service”? And Google Pages, Maps, etc. – those are arguably social in nature, or will be in the future.

Google balked at this language, and the deal fell apart. My Google source also disputes the claim that Google balked at being able to technically separate public from private data. Conversely, my Facebook source counters that the real issue of public vs. private had to do with Google’s refusal to honor changes in privacy settings over time – for example, if I deleted those soccer pictures, they should also be deleted from Google’s index. There’s a point where this all devolves to she said/he said, because the deal never happened, and to be honest, there are larger points to make.

So let’s start with this: If Facebook indeed demanded that Google not use publicly available Facebook data, it’s certainly understandable why Google wouldn’t agree to the deal. It may not seem obvious, but there is an awful lot of publicly available Facebook pages and data out there. Starbucks, for example, is more than happy to let anyone see its Facebook page, no matter if you’re logged in or not. And then there’s all that Facebook open graph data out on the public web – tons of sites show Facebook status updates, like counts and so on in a public fashion. In short, asking Google to not leverage that data in anything that might constitute a “social service” is anathema to a company who claims its mission to crawl all publicly available information, organize it, and make it available.

It’s one thing to ask that Google not use Facebook’s own social graph and private data to build new social services – after all, the social graph is Facebook’s crown jewels. But it’s quite another thing to ask Google to ignore other public information completely.

From Google’s point of view, Facebook was crippling future products and services that Google might create, which was tantamount to an insurance policy of sorts that Google wouldn’t become a strong competitor, at least not one that leverages public information from Facebook. Google balked. If Facebook’s demand could have been interpreted as also applying to Google’s search results, well, that’s a stone cold deal killer.

I certainly understand why Facebook might ask for what they did, it’s not crazy. Google might well have responded by narrowing the deal, saying “Fine, you don’t build a search engine, and we won’t build a social network. But we should have the right to create other kinds of social services.” As far as I know, Google didn’t chose to say that. (Microsoft apparently did). And I think I know why: The two companies realized they were dancing on the head of a pin. Search = social, social = search. They couldn’t figure out a way to tease the two apart. Microsoft has cast its lot with Facebook, Google, not so much.

When high stakes deals fall apart, both sides usually claim the other is at fault, and that certainly seems to be the case here. It’s also the case with the Twitter deal, which I’ve gotten a fair amount of new information about as well. I hope to dig into that in another post. For now, I want to pull back a second and comment on what I think is really going on here, at least from the perspective of a longer view.

I think what we have here is a clear indication that the search paradigm we’ve operated under for a decade or so is broken. That paradigm stems from Google’s original letter to shareholders in 2004. Remember this line?: Our search results are the best we know how to produce. They are unbiased and objective, and we do not accept payment for them or for inclusion or more frequent updating.

In many cases, it’s simply naive to claim Google is unbiased or objective. Google often favors its own properties over others, as Danny points out in Real-Life Examples Of How Google’s “Search Plus” Pushes Google+ Over Relevancy and others have also detailed. But there is a reason: if you’re going to show results from all other possible contenders, replete with their associated UI and functional bells and whistles (as Google does with its own Maps, Pages, Plus etc.), well, it’s nearly impossible now to determine which service is the right answer to a particular person’s query. Not to mention, you need to put a deal in place to get all the functionality of the service. Instead, Google has opted, in many cases, to go with their own stuff.

This is not a new idea, by the way. Yahoo’s been doing it this way from the beginning. The contentious issue is that biasing some results toward Google’s own products runs counter to Google’s founding philosophy.

I have a theory as to why all this is happening, and I don’t entirely blame Google. Back when search wasn’t personalized, Google could defensibly say that one service was better than another because it got more traffic, was linked to more (better PageRank), and so on. Back when everyone got the same results and the web was one homogenous glob of HTML, well, you could claim “this is the best result for the general population.” But personalized search has broken that framework – I lamented this back in 2008 with this post: Search Was Our Social Glue. But That Is Dissolving (more here).

With the rise of Facebook and the app economy, the problem of search has become terribly complicated. If you want to have results from Facebook in your search, well, that search service has to do a deal with Facebook. But what if you want results from your running app (I have hundreds of rides and runs logged on AllSportGPS, for example)? Or Instagram? Or Path, for that matter? Do they all have to do deals with Google and Bing? There are so many unconnected pieces of the Internet now (millions of apps, most of our own Facebook experiences, etc. etc.) that what’s a good personal result for one person is not necessarily good for another. If Google is to stay true to its original mission, it needs a new framework and a massive number of new signals – new glue – to put the pieces back together.

There are several ways to resolve this, and in another post, I hope to explore them (one of them, of course, is simply that everyone should just go through Facebook. That’s the vision of Open Graph). But for now, I’m just going to say this: The issues raised by this kerfuffle are far larger than Google vs. Facebook, or Google vs. Twitter. We are in the midst of a major search paradigm shift, and there will be far more tears before it gets resolved. But resolve it must, and resolve it will.

(image) **Updated at 3 PM PST with more info about Facebook/Google negotiations…please read to the bottom…**

In today’s business climate, it’s not normal for corporations to cooperate with each other when it comes to sharing core assets. In fact, it’s rather unusual. Even when businesses do share, it’s usually for some ulterior motive, a laying of groundwork for future chess moves which insure eventual domination over the competition.

Such is the way of business, particularly at the highest and largest levels, such as those now inhabited by top Internet players.

Allow me to posit that this philosophy is going to change over the next few decades, and further, indulge me as I try to apply a new approach to a very present case study: That of Google, Facebook, and Twitter as it relates to Google’s search index and the two social services’ valuable social interaction datasets.

This may take a while, and I will most likely get a fair bit wrong. But it seems worth a shot, so if you feel like settling in for some Thinking Out Loud, please come along.

First, some abridged background. Back in 2009, on the Web 2 Summit stage of all places (yes, I was the emcee), Google, Microsoft, Facebook and Twitter announced a flurry of deals, some of which were worked out in a last minute fury of negotiations. Early in the conference Microsoft announced it would incorporate Twitter and Facebook feeds into its new search engine Bing. Not to be outdone, Google announced a deal with Twitter the next day. However, Google did not announce a deal with Facebook, and the two companies have never come to terms. Meanwhile, Microsoft has continued to deepen its relationship with Facebook data, to the point of viewing that relationship as a key differentiator between Bing and Google search.

All of these deals have business terms, some of them financial, all with limits on how data is used and presented, I would presume. Marissa Mayer of Google told me on the Web 2 stage that there were “financial terms” in Google’s deal with Twitter, but would not give me any details (nor should she have, frankly).

Fast forward to the middle of last year, when the Google/Twitter deal was set to expire. At about the same time as renewal was being negotiated, Google launched Google+, a clear Facebook and Twitter competitor. For reasons that seem in dispute (Google said yesterday Twitter walked away, Twitter has not made a public statement about why things fell apart), the renewal never happened.

And then yesterday, Google incorporated Google+ results into its main search index, sparking a debate in the blogosphere that rages on today – Is Google acting like a monopolist? Does Facebook or Twitter have a “right” to be included in Google results? Why didn’t Google try to negotiate inclusion with its rivals prior to making such a clearly self-serving move?

Google execs, including Chair Eric Schmidt, told SEL’s Danny Sullivan that the company would be happy to talk to both companies to figure out ways to incorporate Twitter and Facebook into Google search, but clearly, those talks could have happened prior to the G+ launch, and they didn’t (or they did, and did not work out – I honestly have no idea). When Danny pointed out that Twitter pages are publicly available, Schmidt demurred, saying that Google prefers to “have a conversation” with a company before using its pages in such a wholesale fashion (er, so did they have one, or not? Anyway…). He has a point (commercial deals are de-rigueur), but…that conversation happened last year, and apparently ended without a deal. And around we go…

What’s clear is this: All the companies involved in this great data spat are acting in what they believe to be their own self interest, and the greatest potential loser, at least in the short term, is the search consumer, who will not be seeing “all the world’s information” but rather “that information which is readily available to Google on terms Google prefers.”

The key to that last sentence is the phrase “what they believe to be their own self interest.” Because I think there’s an argument that, in fact, their true self interest is to open up and share with each other.

Am I nuts? Perhaps. But indulge my insanity for a bit.

The Cost of Blinkered Competition

Back in the Web 1.0 days, when I was running The Industry Standard, I had a number of strong competitors. It’s probably fair to say we didn’t like each other much – we competed daily for news stories, advertiser dollars, and the loyalty of readers. The market for information about the tech industry was limited – there were only so many people interested in our products, and only so much time in the day for them to engage with us.

My strategy to win was clear: We’d make the best product, have the best people, and we’d win on quality. When I heard about one of our competitors badmouthing us, I’d try to ignore it – we were winning anyway: We had the dominant marketshare, the most revenues ($120mm in 2000, with $21mm in EBIDTA), and the best product.

Then something strange happened: an emissary from a competitor called and asked for a meeting. Intrigued, I took it, and was surprised by his offer: Let’s put our two companies together. Apart, he argued, we were simply tearing each other down. Together, we could consolidate the market and insure a long term win.

I considered his idea, but for various reasons, we didn’t take him up on it. I felt like we had the dominant position, that his offer was driven by weakness, not intellectual soundness, and I also felt that a combination would require that my shareholders take on too much dilution.

Two years later, both of us were out of business.

Now, I’m not sure it would have mattered, given the great crash of 2001. But what is certainly true is that I could have thought a bit deeper about what this fellow was proposing. Back in the days of print-bound information, we were essentially competing on what were publicly available assets: stories, particularly interpretations and reportage around those stories, and people: writers, editors, ad sales executives, and management. Short of combining companies, there wasn’t really any other way for us to collaborate, or at least, so I thought.

But perhaps there could have been. It’s been more than a decade since that meeting, and I still wonder: perhaps we could have shared back-end resources like operations, publishing contracts, etc. and saved tens of millions of dollars. We’d compete just on how we leveraged those public assets (stories, people). Perhaps we might have survived the wipeout of the dot com crash. We’ll never know. Since those publications died, the blogosphere has claimed the market, and now it’s far larger than the one we lost back in 2001. Of course I started Federated Media to participate in that model, and now FM has as large a revenue run rate as the Industry Standard, across a far more diverse market.

Why am I bringing this up? Because I think there’s a win-win in this whole Google/Facebook/Twitter dust up, but it’s going to take some Thinking Differently to make it happen.

Imagine Twitter and Facebook offer efficient access to all of their “public” pages – those that its users are happy to share with anyone (or even just to their pre-defined “circles”) – to Google under some set of reasonable usage terms. Financial terms would be minimal – perhaps just enough to cover the costs of serving such a large firehose of data to the search giant. Imagine further that Google, in return, agrees to incorporate this user data in a fashion that is fair – ie doesn’t favor any service over any other – be it Twitter, Google+, or Facebook.

Now, negotiating what is “fair” will be complicated, and honestly, should be subject to iteration as all parties learn usage patterns. And of course all this should be subject to consumer control – if I want to see only Twitter or Facebook or Google+ results in particular searches (or all results for that matter), I should have that right.

And this leads me to my point. Such a set up, regardless of how painful it might be to get right, would create a shared class of assets that would have to compete at the level of the consumer. In other words, the best service for the query wins.

That’s always been Google’s stated philosophy: the best answer for the question at hand. Danny gets to this point in a piece posted last night (which I just saw as I was writing this): Search Engines Should Be Like Santa From “Miracle On 34th Street”. In it he argues that Google’s great strength has been its pattern of sending people to its competitors. And he upbraids Google for violating that principle with its Google+ integration.

It doesn’t have to be this way. It’s not only Google that’s at fault here. Facebook won’t share with Google on any terms, Facebook and Google have not been able to come to terms on how to share data (more on that below*), and Twitter clearly wants some kind of value if it is to share its complete firehose with the search giant. Imagine if all three were to agree on minimal terms, creating a public commons of social data. Yes, that would put Google in an extreme position of trust (not to mention imperil its toddler Google+ service), but covenants can be put in place that allow parties to terminate sharing for clear breaches which demonstrate one party favoring itself over others.

Were such a public commons to be created, then the real competition could start: at the level of how each service interprets that data, and adds value to it in various ways.

In it I said: It’s time that services on the web compete on more than just the data they aggregate….

I think in the end, Facebook will win based on the services it provides for that data. Set the data free, and it will come back to roost wherever it’s best used. And if Facebook doesn’t win that race, well, it’ll lose over time anyway. Such a move is entirely in line with the company’s nascent philosophy, and would be a massively popular move within the ouroborosphere (my name for all things Techmeme).

I think it’s a major strategic mistake to not offer (Facebook’s pages and social graph) to Google (and anyone else that wants to crawl it.) In fact, I’d argue that the right thing to do is to make just about everything possible available to Google to crawl, then sit back and watch while Google struggles with whether or not to “organize it and make it universally available.” A regular damned if you do, damned if you don’t scenario, that….

For an example of what I mean, look no further than Twitter. That service makes every single tweet available as a crawlable resource. And Google certainly is crawling Twitter pages, but the key thing to watch is whether the service is surfacing “superfresh” results when the query merits it. So far, the answer is a definitive NO.

Why?

Well, perhaps I’m being cynical, but I think it’s because Google doesn’t want to push massive value and traffic to Twitter without a business deal in place where it gets to monetize those real time results.

Is that “organizing the world’s information and making it universally available?” Well, no. At least, not yet.

By making all its information available to Google’s crawlers (and fixing its terrible URL structure in the process), Facebook could shine an awfully bright light on this interesting conflict (of) interest.

Thanks to Google’s inclusion of Google+ in its search index, that light has now been shone, and what we’re seeing isn’t all good. I’m of the opinion that a few years from now, each and every one of us will have the expectation and the right to incorporate our own social data into web-wide queries. If the key parties involved in search and social today don’t figure out a way to make that happen, well, they may end up just like The Industry Standard did back in 2001.

But not to worry, someone else will come along, pick up the pieces, and figure out how to play a more cooperative and federated game.

–

*Update: I’ve heard from a source with knowledge of the Facebook/Google negotiations over integration of Facebook’s data into Google’s search index. This source – who while very credible does come from Facebook’s side of the debate – explained to me that during the 2009 negotiations, Google balked at Facebook’s request that Facebook data be protected in the same fashion as it is in Facebook’s deal with Bing. In essence, Google claimed no way to keep data within circles of friends in the context of a Google search. According to this source: “Senior executives at Google insisted that for technical reasons all information would need to be public and available to all.” But the source goes on to point out that in Google’s own integration of Google+, Google does exactly what it claims it could not do with Facebook data. “The only reason Facebook has a Bing integration and not a Google integration is that Bing agreed to terms for protecting user privacy that Google would not,” this source told me.

Also, and quite interestingly, Google also refused to agree to a clause which stated that Google could not use the data to build its own social network. Now, this is where things can get very dicey. It’s very hard to prove whether or not a company is using the data in particular ways, and had Google agreed to that clause, it might have severely limited its ability to build Google+. What is clear is that Microsoft agreed to Facebook’s terms.

The integration of Google+ into Google’s native search results has been at the top of Techmeme all day long. And right after I wrote my post on the subject (about four hours ago), Twitter’s general counsel picked up on it, resulting, I believe, in the most RT’s of a Searchblog post in the history of the site.

Just now I received an official statement from Twitter on the subject. I didn’t ask for it – I think it must have been sent out to a large list of press and bloggers. Here it is in full:

For years, people have relied on Google to deliver the most relevant results anytime they wanted to find something on the Internet.

Often, they want to know more about world events and breaking news. Twitter has emerged as a vital source of this real-time information, with more than 100 million users sending 250 million Tweets every day on virtually every topic. As we’ve seen time and time again, news breaks first on Twitter; as a result, Twitter accounts and Tweets are often the most relevant results.

We’re concerned that as a result of Google’s changes, finding this information will be much harder for everyone. We think that’s bad for people, publishers, news organizations and Twitter users.

Meanwhile, my aside at the bottom of the post wondering about anti-trust has been echoed by any number of well known commentators. I wonder if Facebook is about to make a statement?

For what it’s worth, I wrote about all this, after a fashion, in this post in 2009:

In the post, Google extols the virtues of incorporating results such as “your personal content or things shared with you by people you care about. These wonderful people and this rich personal content is currently missing from your search experience. Search is still limited to a universe of webpages created publicly, mostly by people you’ve never met. Today, we’re changing that by bringing your world, rich with people and information, into search.”

OH MY GOD! thinks I. GOOGLE IS FINALLY WORKING WITH FACEBOOK!

Nah, just kidding. What’s really going on is that Google is fully incorporating Google+ into its index. It’s as if Facebook doesn’t exist.

Now, I’ve been on this one before, and I’m sure others will point it out, or simply roll their eyes and call it a dead issue. Dead because we all know that Google hasn’t made peace with Facebook, and therefore is not crawling Facebook data, nor integrating Facebook results into its core search product in any other way than what’s absolutely necessary (ie those lame public Facebook profile pages). Facebook, in turn, has not made most of what happens inside Facebook available to search engines. It’s a standoff, because neither company really knows how to value the other company’s partnership.

And it sucks for the web. The unwillingness of Facebook and Google to share a public commons when it comes to the intersection of search and social is corrosive to the connective tissue of our shared culture. But as with all things Internet, we’ll just identify the damage and route around it. It’s just too bad we have to do that, and in the long run, it’s bad for Facebook, bad for Google, and bad for all of us. (BTW, Google also doesn’t show Twitter or Flickr results either, or any other “social” service. Just its own, Google+ and Picasa.)

Google addresses this issue in a SEL piece today: “Facebook and Twitter and other services, basically, their terms of service don’t allow us to crawl them deeply and store things. Google+ is the only [network] that provides such a persistent service,” (said Google exec Amit) Singhal. “Of course, going forward, if others were willing to change, we’d look at designing things to see how it would work.”

Er, something tells me hell will freeze over first. Google’s already failed to get a data deal done with both Twitter and Facebook. I doubt they’ll take another run at it soon, though I wish they would.

Instead, we have the deepening trend of each of the Internet Big Five trying to be All Things to All People, creating a World That If Only You’d Use Exclusively, You’d Never Have To Leave.

Ick. Remember when Google used to be a neutral player that crawled the Whole Dern Web? So sad to see that era pass. It’s not Google’s fault, entirely, but it’s sad nonetheless.

—

NB: I should add that I am fully aware that the integration of G+, and *only* G+, into Google’s search service is a major win for Google’s fledgling social service. I’d expect a big bump in usage due to this, if the integration is done well (ie, doesn’t irritate users). It’s clearly “tying” in the sense of what Microsoft got slapped for in its DOJ antitrust case in the late 90s, but the context is different – Google doesn’t have a clear monopoly in search, just a pretty darn big one. If Microsoft really wanted to mess with Google, it could shut down Bing. Then Google might have some problems on its hands. Stranger things….

This year I tried something new with my predictions, writing deeper posts on each one. I got to six, but I underestimated how long it would take to write 1,000 or so words for each post. I’m pushing past 10,000 words for the past week, and “predictions season” is pretty much over. I think it’s about time I gave all of us a break, and just got down to some rapid fire predictions. This will be my last predictions post, and most likely the one most likely to bring down my year end grade, because I’m just going to shoot from the hip. It’s something I’ve never really done before, but that’s why I’m doing it. These are notions, hunches, itches I’ve not scratched. But what the heck, this is for the fun of it. To them:

– Google’s Chromebook will triple its marketshare by the end of the year. I can’t figure out what its marketshare is now, but it’s pretty small. Another way of putting this is Chromebook will be a success this year.

– Obama will win the 2012 election, thanks in part to the tech community rallying behind him due to issues like SOPA, visas, and free speech.

– Both Apple and Amazon will make billion-dollar acquisitions. More interestingly, so will Facebook.

– Android will be brought to heel by Google, eliciting both massive complaints and cheers, depending on where you sit.

Amidst all the chaos, tragedy, and tumult that was 2011, I noticed one very clear theme: Most of us are struggling with the role corporations play in our society. The 14th Amendment (yes, the one that banished slavery) established corporations, in the US, as “persons” in the legal sense. In 2010, Citizens v. United sanctified corporations as equivalent to you and I in terms of political speech; in 2011, we began to see the impact of that decision on our political process here in the US (in short, follow the money). The freedom to “associate in corporate form,” as it is termed in portions of the Citizens decision, is one I sense all of us are not entirely certain about. Corporations are utterly undemocratic organizations, and being a part of one is often not a choice, but a necessity. Does joining a corporation mean that you must defend that corporations’ point of view and now Constitutionally-protected right to speech?

Usually, at least in practice, the answer is yes. That corporation is paying your salary, and keeping food on your family’s table. Speaking out against it would be folly. This creates a tension in society that is clearly starting to surface. We overthrew the feudal system in the 1600s, and the theocracy in the 1700s. But currently, corporations play similar roles in many of our lives, either directly or indirectly.

Certainly the Occupy Wall Street movement is one expression of this tension, but I’m not certain it will be the only one. Corporations are arguably the most powerful institutions in human history, more powerful than all but the largest governments. If that sounds silly, remember that the cash and cash equivalent hoard of the Internet Big Five – $180 billion and counting – is larger than the GDP of all but 50 countries. And that doesn’t account for leverage. The top 1000 corporations in the US are holding nearly a trillion dollars in pure cash.

From a balance sheet prospective, corporations are in far, far better shape than just about every country in the world. Even as our personal incomes shrink on a per capita basis, and the world dips in an out of what feels like an eternal recession, corporate profits are up and up again.

This feels a bit out of whack. And while #OWS is one reaction to that dissonance, I’m not sure it’ll be the only one. I think 2012 is the year we all start to question the role corporations can and should play in our society, and doing so won’t (or shouldn’t) be seen as an indication of some leftist or political agenda, but rather as a reasonable outgrowth of how a thinking person sorts through the solution of some of our most pressing problems. Because at the end of the day, we can’t really solve those problems without organizing ourselves into commercial entities. The question, however, is simply this: Can we organize ourselves into corporations without ending up doing things that, if one were to judge corporations as people, would be considered amoral, evil, or psychopathic?

So far, the results are mixed at best. But I have a strong sense that we can and will do better when it comes to how we manage our corporations. And it starts with the industry we’re all part of. While it can be disputed endlessly as to its specific merits, Google’s informal corporate mantra of “Don’t Be Evil” was a watershed moment in the history of corporations. And as “The Information” becomes the most important currency in our culture, and the ability to code (and create great information-driven products) becomes its most prized skill, we’re seeing the rise of a new kind of corporate leader. Perhaps we’re shifting from corporate skillsets that value profit over all other metrics (psychopathic qualities which arguably led us to the financial crisis) to ones that value, well, doing well by doing good.

It could happen. But I’m not arguing it will in 2012. What I am predicting is that this debate will become central to our political and cultural conversation in 2012. It feels like it’s time to have it, without screaming at each other in the process.

And by the way, this is where corporate marketing comes in, in a critical way, but more on that in another post.

(image) One of the things that pops out of the “Big Five” chart I just posted, at least if you stare at it a bit, are the places where each company needs to get strong, quickly. Apple is weak in social and one dimensional in ad solutions. Microsoft needs to improve its device products, build out its entertainment distribution muscle, and keep improving search share. Google wants to get better in productivity software, social, and payments. Amazon needs help in devices, social, and OS. Facebook has work to do in many areas, including devices, search, payment, and voice.

When the five largest companies in our space have a lot of needs, they tend to pull out the wallet and go shopping. Sometimes they buy their way into partnerships, but often, they simply buy.

Hence my fifth prediction for 2012: Expect Internet M&A to heat up, big time. It’s not just going to be the Big Five who drive this trend, it’ll be a whole mess of players looking to consolidate power and press into the double-digit growth market that is the Internet (and by Internet, I also mean mobile and enterprise, of course). Yahoo’s new CEO Scott Thompson knows how to buy companies and has a data focus, for example. That could mean competition to purchase marketing, ad tech, and data companies like Blue Kai, Quantcast, or MarketShare. MediaBank is on a tear and will be on the lookout for similar kinds of companies. IBM has a deep interest in the marketing tech world, expect Big Blue to make some big moves as well. And Twitter will certainly be flexing its muscles, now that it’s bulked up with nearly a billion in fresh capital.

If I had to name a few companies I expect to be in play amongst the Big Five, they would be:

Instagram. This searing hot proof-of-iPhone app is not only a strong social play, it’s a massive image and data goldmine to boot. I could imagine a bidding war for Instagram between Apple (which really needs a social win), Twitter (which could really use a strong photo play), Facebook (which might buy it to keep it out of Apple or Google’s hands), and Google (who would see it as a way to sex up Google+ and Picasa). Of course Yahoo would vie for Instagram as well, but I’m not sure it could win.

Pinterest. It’s social. It’s media. It’s data. Is it a mayfly? Perhaps, but I think it’ll be in play in 2012.

Square. Everyone loves small business, and everyone loves payments. Visa already owns a stake, but that won’t stop Dorsey from landing where he feels the fit is best. That might be Amazon.

Evernote. If any of the Big Five are looking to bolster their productivity suite, Evernote might pique their interest.

These are just off the top of my head, and I’m not a VC (or a daily tech reporter for that matter), so I’ll leave the rest to your imagination. Suffice to say, I predict 2012 is going to be a banner year for tech and Internet M&A. Who do you think will be swept up, and why?